Oil Posts Modest Gains on Hope of US Debt Ceiling Deal

Meanwhile, Russia exports continue to defy that country's output cut pledge: File Image/Pixabay

Oil on Friday achieved modest daily as well as weekly gains, the former attributed to the perception that Washington would achieve a debt ceiling deal and prevent a possible default.

Brent settled up 69 cents at $76.95 a barrel while West Texas Intermediate closed up 84 cents at $72.67 per barrel; both benchmarks posted a second week of gains, with Brent climbing 1.7 percent and WTI rising 1.6 percent.

Trading optimism rested on the flimsiest of circumstances, with U.S. treasury secretary Janet Yellen saying on Friday that Washington would run short of money to pay its bills on June 5 unless Congress raised the $31.4 trillion debt ceiling.

This presumably gave policy makers more time to negotiate, as previously the Treasury said the deal needed to be reached by June 1.

However, crude's Friday price rise was capped significantly by confusion arising from Saudi Arabia on one hand hinting at possibly more output cuts from the Organization of Petroleum Exporting Countries (OPEC), and Russia on the other said to be content with current prices and output.

This caused John Kilduff, founding partner at Again Capital, to remark, "I think we all are on guard here ahead of next week's OPEC meeting."

For the record, Bloomberg commodities analysts Julian Lee and Jack Whittels on Friday noted that there is scant evidence of a production cut that the Russians claimed was underway.

They wrote, "Shipments of Russian crude beyond the country's borders are rising, not falling, even as the country is supposedly almost three months into a 500,000 barrel per day output cut, made in retaliation for sanctions and price caps imposed by Group of Seven nations.

"Yes, external flows of refined products are dropping, but they always fall around now; in fact, they declined by slightly less than they normally do between the first and second quarters."

Crude shipments from Russian ports in the four weeks to May 21 were more than 480,000 bpd higher than during the four weeks to Feb. 26, according to vessel tracking data.

In other oil related news on Friday, ConocoPhillips announced that it had exercised its right to acquire TotalEnergies' 50 percent stake in the Surmont oil sands field for $3 billion and as much as $325 million in contingent payments.

This gives the Texas-based energy giant full control of the Canadian operation and prevented Suncor Energy Inc. to buy into the site; however, TotalEnergies said in a statement that it would be "open" to completing a transaction with Suncor for the remaining assets from the original package.